Wednesday, 19 October 2016

Whether tenants can rent their units out on Airbnb is a question that I am being asked more and more. Landlord's are calling me expressing concern that there are strangers in their buildings and that other tenants are complaining about them. The "strangers" it turns out are Airbnb guests who are paying to use a tenant's apartment for a short period of time. Much like a hotel/motel.

The presence of Airbnb guests can be problematic for landlords. These guests are often "partying", often are in louder groups, are entering other units when they get "lost", use common area facilities and services more intensely, and basically treat the apartment building like a hotel. Regular full time tenants resent the change in feeling and atmosphere that these Airbnb guests bring with them and there are more instances of inappropriate behavior and hence a feeling that the building is less safe.

In this context, I'm asked, can the landlord stop a tenant from renting out their apartment on Airbnb?

The short answer, in my opinion, is an easy and unequivocal yes. My legal opinion is that it is illegal for tenants, whose tenancies are subject to the Ontario Residential Tenancies Act, to rent out their apartments on Airbnb--with, or without, a landlord's consent. The prohibition, of course, is not just in relation to Airbnb. The prohibition applies equally to any "sharing" site that operates in the manner of Airbnb.

As people reading this likely know, Airbnb provides a software platform that facilitates the renting of apartments, homes, (residential properties), to prospective short term guests. The platform is structured much like a hotel booking site and the terminology on the site makes one think of the hotel booking process. The owner of the apartment/condo/house makes some money renting out the home for a short period of time and the person renting it gets a place that is generally nicer and cheaper than a typical hotel room.

THE REASON IT'S ILLEGAL

It should be noted that my opinion about the illegality of renting out a unit on Airbnb applies only to tenants renting out their units. This opinion is not intended to speak to the legality of "owners" or commercial tenants renting out residential units on Airbnb.

Section 2(2) of the RTA provides as follows:
For the purposes of this Act, a reference to subletting a rental unit refers to the situation in which,

a) the tenant vacates the rental unit;

b) the tenant gives one or more other persons the right to occupy the rental unit for a term ending on a specified date before the end of the tenant’s term or period; and

c) the tenant has the right to resume occupancy of the rental unit after that specified date.

What should be clear from reading this definition of sub-let is that this is what a tenant who is renting on Airbnb is doing. They are advertising their unit for rent for a short period of time. When it is rented, the tenant vacates the unit while it is to be occupied by the Airbnb guest who the tenant is authorizing to occupy the rental unit. The Airbnb contract then has an end date at which time the Airbnb guest will "check out" and the tenant resumes occupancy of the rental unit.

Tenants do not have the legal right to sublet their apartments in Ontario without the consent of the landlord. Section 97 of the RTA deals with sub-letting a rental unit and it provides as follows:

A tenant may sublet a rental unit to another person with
the consent of the landlord ...

The noteworthy part of the section for the purpose of this opinion is the highlighted part and that is with respect to "consent". A tenant may not sublet a rental unit without first obtaining the consent of the landlord. The failure to obtain consent is contrary to the RTA and as it is a direct violation of the provisions of the RTA it may be characterized as an illegal act. An illegal act in the landlord and tenant context does not mean only a criminal act. An illegal act in Landlord and Tenant law is any act that is contrary to law.Subletting without consent is also an infringement of a landlord’s lawful right, privilege or interest as recited in section 64 RTA as a ground for termination. This latter violation is the basis for serving an N5 on the tenant for renting out the unit on www.airbnb.ca . How subletting without consent is an interference with a lawful right, privilege or interest may be characterized in different ways. The obvious ways are that the landlord's economic interests are interfered with by affecting the other tenants' feeling in the building, changing the use of the building from apartment to hotel, and the presence of airbnb guests also changes the "risk" in the building likely impacting insurability.

ILLEGAL ACT

I think that the most powerful objection to a tenant renting out their unit via Airbnb is founded in the illegality of profiting from the inflated rental of the unit. Interestingly, I think that the sections I'm about to discuss can not be overcome or waived even with the landlord's consent.

Section 134(3) of the RTA provides as follows:

Unless otherwise prescribed, no tenant and no person acting on behalf of the tenant shall, directly or indirectly,

(a) sublet a rental unit for a rent that is payable by one or more subtenants and that is greater than the rent that is lawfully charged by the landlord for the rental unit;

(b) collect or require or attempt to collect or require from any person
any fee, premium, commission, bonus, penalty, key deposit, or other
like amount of money, for subletting a rental unit, for surrendering
occupancy of a rental unit or for otherwise parting with possession of
rental unit.

When you consider the point of renting out an apartment on Airbnb, you quickly realize that the tenant is doing so for the purpose of making money. The money that a tenant can make on Airbnb, over the course of a few weekends can pay the entirety of the rent and still leave the tenant with money left over. The daily, weekly, or monthly, rents obtained through Airbnb vastly exceed the rent that the tenant pays to the landlord.

Section 134, above, makes it clear that it is illegal for a tenant to sublet a rental unit for any sum of money that is greater than the lawful rent for the unit. Further, almost all of the advertisements I have read on Airbnb require the payment of a security deposit or other deposit. These are clearly illegal under section 134((3)(b).

As the amount being charged to Airbnb guests exceeds what is being charged to the tenant, the collection of that rent is illegal and contrary to the RTA. Interestingly, this is illegal, even if the landlord gave the tenant consent to sublet the unit.

The "sub-tenants" who rent from the tenant, through Airbnb, are entitled to apply to the Ontario Landlord and Tenant Board for a refund of the money that they paid that is in excess of the lawful monthly rent that was charged to the tenant. This is set out in section 135(3) which provides: " A subtenant may apply to the Board for an order under subsection 1 ... . Subsection 1 of section 135 provides that an application may be made for the return of money collected illegally.

In the context of this section it is not difficult to see the policy reason for preventing a tenant from being able to earn money from their rental unit in this way. Tenants would become landlords and speculate in rental units and ultimately, when subtenants had real problems the actual tenants could disappear without accountability.

Based on the foregoing it is my legal opinion that the activity of Ontario tenants renting out their units on www.airbnb.ca or similar websites, is not permissible and in fact is contrary to the Ontario Residential Tenancies Act.

Ottawa lawyer and partner at Quinn Thiele Mineault Grodzki LLP. Graduate of Queen's University in Kingston, Ontario. Called to the bar in Ontario in 1997. Undergraduate degree at Colby College, Waterville Maine, U.S.A.

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About Michael Thiele

Ottawa lawyer and partner at Quinn Thiele Mineault Grodzki LLP. Graduate of Queen's University in Kingston, Ontario. Called to the bar in Ontario in 1997. Undergraduate degree at Colby College, Waterville Maine, U.S.A.